AS we know, the market is notorious for changing its mind quickly. Because of this, it is important to create a trading system that recognizes when these swift turns take place. For example, from May to August 2005, the NASDAQ Composite was trending upward. From August to October 2005, the market corrected. From October 2005 till now, it has resumed its upward trend. Was your trading system able to identify these changes in a timely manner? If you don't know, the start of a new year is a good time to take a look.
Designing a trading system is extremely challenging but if it is done well, it can make all the difference in your trading results. It's not easy, as Jeffrey Owen Katz reminds us in this month's Technical Analysis of STOCKS & COMMODITIES interview, starting on page 56. You have to constantly monitor your systems, adapt them to changing market conditions, create different ones for different markets, create different ones for different time frames, or completely abandon them if you feel they no longer work. The key is to create one that sets itself apart.
BUT where can you begin? To find out, read our feature article, "Developing Your Own Indicators" by Lee Leibfarth. If you've hesitated in taking those first steps toward designing a trading system, this article will rid you of that hesitation and you'll be well on your way to creating a logical and profitable trading system. And those of you who are beyond this stage will find gold in John Ehlers's piece, "The Swiss Army Knife Indicator." Why "Swiss Army Knife"? You guessed it ... it's an indicator that does all things. The article begins on page 28. And even though you may have created a solid trading system, don't forget that a system is only one, although important, part of the trading profession. You need to have a good trading plan. You can find out how to create one by reading Vadym Graifer's article, "Trading Plan: A Blueprint For Your Trading." That article starts on page 72.
We hope our collection of articles in this issue will prepare you for a profitable year. Even if you have a trading system that produces the results you want, there may be some new ideas in this issue that you may wish to incorporate into your trading.
Here's to a successful trading year.
Originally published in the January 2006 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2005, Technical Analysis, Inc.
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